Appeals court reins in judge on Sec-citigroup settlement
NEW YORK | A federal appeals court said Thursday that a judge likely overstepped his authority when he blocked a $285 million settlement over toxic mortgage securities by calling it bad policy for a regulatory agency to accept a deal that does not include an admission of liability.
The 2nd U.S. Circuit Court of Appeals in Manhattan suspended the effect of Judge Jed Rakoff’s decision to turn down the settlement between Citigroup and the Securities and Exchange Commission until it can fully study the case.
It said there was a “strong likelihood” that Citigroup and the SEC would succeed in overturning Judge Rakoff’s ruling. In doing so, a threejudge appeals panel noted that Judge Rakoff thought it did not serve the public interest for the SEC to let Citigroup settle without admitting liability.
“It is not, however, the proper function of federal courts to dictate policy to executive administrative agencies,” the 2nd Circuit ruling said. “While we are not certain we would go so far as to hold that under no circumstances may courts review an agency decision to settle, the scope of a court’s authority to second-guess an agency’s discretionary and policy-based decision to settle is at best minimal.”